Deregulation: From Theory to Practice

This paper links microeconomic theory with the political economy of regulation. We explain why modern economies tend to become persistently over-regulated and we outline a practical strategy for deregulation. We argue that regulations are not the works of a benevolent central planner but rather of concentrated and bureaucratic interests. We provide examples from the current deregulation program being implemented in Argentina. We also review the theory of “market failures” (asymmetric information, public goods, externalities, monopoly power), and show how these concepts may actually justify deregulation rather than regulation. Finally, we provide an operational blueprint for deregulation. In short, how to implement deregulation in a few easy steps. JEL Classification Codes: D72; D73; H11; K23; L51; O17; O54; P16